THE DEANS OF BUSINESS

Tourism dollars are essential to state’s economy

editor’s Note: This column is a new offering of the Bangor Daily News’ business page. The Deans of Business column will rotate among three business schools’ deans: Ivan Manev of the University of Maine, Ronald Nykiel of Husson University and James Shaffer of the University of Southern Maine.

John Maynard Keynes verified the concept of the “multiplier effect” in his economic studies in the 1930s. The concept has perhaps the greatest applicability in the tourism industry.

Tourists spend money on travel, lodging, food and beverage and in retail stores thus creating direct income, government revenue (taxes) and employment. There are more effects such as money spent on supplies, inventory replacement, and all the other products and services that supply the place where the tourist spends. All of these subsequent places are classified as indirect or multipliers of the original dollars spent.

Numerous studies have been conducted that reveal for every dollar a tourist spends anywhere from $3 to $10-plus additional dollars of expenditures are generated into the economy.

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Just think about sources of state revenue more directly labeled taxes, or in the case of tourism, taxes paid for by nonstate residents.

There are the tolls, gasoline taxes, taxes on retail purchases, taxes on alcoholic beverages, general sales taxes, taxes on rental cars, etc., etc. These “taxes” form a large input to the revenue taken in by the state — our state that has a large deficit problem. Maine has overspent and now faces the need to not only cease doing so, but reduce the debt and eventually balance its books.

The fastest way to accelerate debt reduction and increase economic productivity is through increased revenues and related jobs. This is where the “multiplier effect” can be an enormous economic force.

The prudent steps already undertaken or in progress such as freezing expenditures and removing red tape for business development are to be applauded. Now it is time to accelerate revenue and job creation.

The state also faces a large aging population (50-years-old-plus) and an outmigration of its younger population (late teens to 20s).

These two age groups form the single largest source of employees for the tourism industry. The tourism industry forms one of the largest revenue generators ($15 billion) to the Maine economy. Thus, one could conclude there is perhaps no greater significant revenue and job creating opportunity for Maine than to prioritize growth in tourism as its No. 1 objective.

Looking deeper into the infrastructure of tourism and tourism-related businesses provides even further support for this prioritization.

Maine has a large base of “cottage” industries: crafts, artists, etc. Tourists’ spending supports the cottage industries. Tourists fuel the lodging and food and beverage business, the campsites and recreational destinations — all significant components of the Maine economy.

Tourists also can become future residents when attracted to an area in which they desire to permanently live. Often these are professionals who can re-establish medical, dental or veterinary practices. Often they are retailers who can start anew here in Maine.

Now how we attract more tourists and increase revenues becomes the challenge and question to be answered.

The answers should involve the best marketing minds and strategists in the state. We know the solutions would include a new marketing plan, more effective use of advertising dollars, investment incentives, and specific plans to increase revenues from out-of-state visitors.

We know much work needs to be done to examine our infrastructure to assure we are tourist accommodating. Are we doing enough to encourage development that brings tourism revenue and jobs our way? Are we doing enough to support community endeavors, attract festivals, events, and other gatherings that enhance our Maine destinations? Are we allocating enough hard dollar support to the No. 1 opportunity for growing our economy and creating new jobs?

In many countries around the globe tourism is recognized at the Cabinet level and viewed as one of, if not the most important economic force.

In these countries, comprehensive planning results in a tourism environment, travel-friendly airports, improved roadways and rail systems leading to key destinations. Moreover, almost all have a strategic tourism-marketing plan that involves cooperative efforts between government and the various components of the tourism industry.

Every weapon in the marketing arsenal from promotions to advertising to hosting events is deployed. This is done because the country knows the extraordinary power of the multiplier effect of tourism.

Is it not time for Maine to recognize it is akin to a country where tourism is the future of its economic growth, its ability to retain and grow its population, improve its infrastructure, and yes, help resolve its financial situation?

Ronald A. Nykiel, dean of the College of Business at Husson University, has a number of books on travel and tourism marketing and served on a presidential commission on travel and tourism, the Board of the United States Travel Association, and on a governor’s revenues forecasting commission.